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3 types of insurance you need in your 20s

When you're young, you may not have much in the way of money or stuff to protect. But insurance is also meant to protect you against catastrophic setbacks that could prevent you from accumulating wealth over your lifetime. Think of these three types of insurance as ways to help ensure security over the long haul:

Health insurance. Being young and healthy doesn't immunize you from medical bills. One accident or illness could saddle you with five- or even six-figure debt. "The real value of health insurance lies in the protection against big expenses like a hospital stay or the ongoing bills associated with a chronic condition like cancer or diabetes," said financial planner Matt Becker, who runs the Mom and Dad Money site. "These are the kinds of things that could happen to anyone and would be difficult to handle on your own."

If you're under 26, you can remain on your parents' policy under a federal law that's part of the Affordable Care Act. Speaking of Obamacare, you also probably qualify for government subsidies that can significantly reduce the cost of coverage. These subsidies are available for people who earn up to four times the poverty level, which is currently $11,670 for a one-person household.

Renter's insurance. You have to obtain homeowner's insurance when you get a mortgage, but typically no one forces you to buy renter's insurance. That's unfortunate because the landlord's policy doesn't cover your stuff. You easily could lose everything in an apartment fire, a natural disaster or a break-in. What's more, the typical renter's policy also provides personal liability coverage, which kicks in if someone gets injured on your property.

Compare the cost of replacing your possessions (electronics, computer gear, clothes, household items) with the monthly cost of $15 to $30 a month for this insurance, and you'll see it's a pretty small price for peace of mind. Make sure to get replacement cost coverage -- otherwise the insurer will pay only for what your property was worth when it was destroyed, rather than what it costs to replace.

Disability insurance. If you got hurt or sick and couldn't work, how long would your savings last? If you're like most young Americans, the answer is "not long." Yet only 33 percent of people aged 21 to 40 polled in a LearnVest study had disability insurance that could replace some of their income, compared to 50 percent who had life insurance. "Long-term disability insurance is something many people overlook, but it's actually more valuable the younger you are," Becker said. "When you're just starting out, your biggest financial asset is your ability to earn an income."

Many people think they don't need disability coverage because their risk of injury on the job is low, but only 5 percent of disabilities are workplace-related, according to the Council for Disability Awareness. Disability insurance isn't cheap, but group policies usually provide the best deal. Your employer may offer short-term or long-term coverage, or both. If you can't get long-term coverage from work, check to see if any professional or other organizations you belong to offer it. The most costly option is usually an individual policy, but you can reduce your premiums by increasing the waiting period from 30 days to 90 days or more if you have sufficient savings to stay afloat during that time.

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